South Korean card issuers are showing a move to gain independence from global card payment networks, such as Visa and Mastercard, by expanding services that allow cardholders to use domestic use-only cards in other countries as well.
According to a report “Tourism Market Trend” released by the Korea Tourism Organization on December 25, the number of South Korean outbound travelers continuously increased every year from 16.08 million in 2014 to 19.31 million in 2015 and 22.38 million in 2016. In particular, the figure is expected to grow further this year due to the longest-ever Chuseok holidays.
As an increasing number of outbound travelers is using credit cards abroad, card issuers are entering partnerships with local card companies to expand services so that cardholders can use domestic use-only cards in other countries as well.
KB Kookmin Card form a strategic partnership with NTT Data, a subsidiary of Nippon Telegraph and Telephone (NTT) Corporation, the largest telecommunications company in Japan, and Kyushu Card Co. on the 15th to enable domestic use-only cardholders to make a payment in Japan from next year. It will also expand domestic use-only car services to Southeast Asian countries, such as Thailand and Vietnam, by the end of the first half of next year.
As more and more people are also trying to make a payment on foreign online websites, KB Kookmin Card has talked with foreign card companies and is about to wind up the negotiation so that cardholders can make a payment with their domestic use-only cards when using foreign hotel reservation sites.
Shinhan Card, the biggest card issuer in South Korea, has provided services allowing its cardholders to make a payment at 20,000 affiliates in Japan with its local credit and debit cards from 2014. They can use their cards at duty free stores at airports, large shopping malls and department stores abroad as well as convenience store “Family Mart” without paying service fees.
BC Card has also established a mutual network partnership with the National Payments Corporation of India (NPCI) in September to offer services that enable domestic use-only cardholders to make a payment in India. An official from BC Card said, “At the moment, the two companies are still discussing so we haven’t decided yet on when the services will be available and how far services areas will be.”
Domestic card issuers are seeking to expand foreign payment services of domestic use-only cards in order to cut costs paid to international card companies. They enter into a partnership with international card issuers, like Visa and Mastercard, to issue credit and debit cards that can be used both at home and abroad and pay foreign brand fees to them under the name of use allotted charges.
As Visa Card increased its fees from 1 percent to 1.1 percent in May last year, domestic card companies has seen their burden grow. Therefore, they are desperate to cut costs by increasing the use of domestic use-only cards and reducing the fees to international brands.